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0:03
thierry brusselle: Greetings and welcome to business 10. This is our chapter one or first chapter. So I want to, you know, first welcome you to the class and talk a little bit about the class and what these chapters. What I recommend you do in terms of how to follow the chapters.
0:22
thierry brusselle: As you can see, I'll be using PowerPoint for for these lectures. What I recommend that you do is that you follow along, not just with PowerPoint, but with the open stacks. thierry brusselle: Textbook you have the link. It's in Canvas. But remember that everything that I'm showing you right now is really a way to apply and summarize the content of the textbook. So, you know, if you, you just follow along each of the
0:52
thierry brusselle: Exhibits entities and items are are there.
0:58
thierry brusselle: I do recommend that you take some notes again if you know by now. I think most of you, what works best for you in terms of studying. If you're not sure, I recommend that you do all of the above until the first exam and that way you can you know basically assess what works best.
1:19
thierry brusselle: As we are about to start chapter one, which is understanding and calming systems and business. I want to start with theme for the class.
1:29
thierry brusselle: And this theme. There's, there's really two two ongoing themes, but the main theme is one that I've used in in all of my business 10 classes, up till now, which is thierry brusselle: The, the idea of success and how you become successful. And what are some ways of ensuring success in business and in life and that notion is, is adaptation. Right. It is always always adaptation. This is unfortunate, but Perfect example right now with
2:03
thierry brusselle: You know, could you look around and see what are the positions the jobs that are resilient to this pandemic and what are the ones that are less. You know what the degrees are thierry brusselle: What people have done to differentiate themselves, etc, etc. And so the the notion is, you know, basically adapt or die when you think about
2:26
thierry brusselle: What the premise of success. And the premise of you being successful, not just in this class, but in every other aspect is always to think about adaptation. So what does that mean well
2:44
thierry brusselle: Think about the you know you. Let's say you're a manager and you know you've been told that things have to change and you have to be the one to tell your employees that there's a new system that you're implementing starting next Monday.
3:01
thierry brusselle: If you, if you think about it. And if you think about your employees have been been trained with system A and some of them feeling super confident and efficient and effective in how they use system A and here you are saying we're going to use system be on Monday.
3:19
thierry brusselle: What, what, what happens is people resist change people fear change because they fear, change the resist change. thierry brusselle: So a lot of your employees are going to right away, fear, or no, I'm not going to know system is going to take me longer. What if I don't get it. What if I thierry brusselle: bad at it and you know it's going to affect my performance and might affect my job. And that's, you know, creates all kinds of factors where you're going to
3:47
thierry brusselle: See resistors to change.
3:51
thierry brusselle: One of the notions in terms of this going back to the notion of adaptation. The adapt or die is for you to really start to legitimately see change as an opportunity see change as an opportunity and be the one who goes up to your boss and says, you said Monday.
4:18
thierry brusselle: Can I have access to system be now. Do you guys have a way to test it out, can be thierry brusselle: Is there a beta that I can have access to. Are you giving early training. You want to be part of that you want to try to see if you can position yourself. thierry brusselle: To just be part of the conversation and benefit from it. So again, these two things right. Adapt or die that notion differentiate yourself but see change as an opportunity
4:46
thierry brusselle: For all of the above. So this is kind of a running thing. And I wanted to take a little bit of time to let you know. thierry brusselle: You know, just really start to ask yourself, see if you're legitimately resist change. And if you are, which is by the way a biological. The reason we've survived, you know, millions of years as species is because we've been able to thierry brusselle: See sometimes change something to be weary about, you know, and not just plunging into it.
5:19
thierry brusselle: And so it does take a little bit of effort to try to change that mindset, so that you can start to really genuinely see changes, an opportunity on the fly. How can I benefit from this. What can I do now.
5:32
thierry brusselle: Alright, so let's let's start on our first chapter.
5:37
thierry brusselle: The learning outcomes. These are from your authors. thierry brusselle: And, you know, basically I, you know, the first chapter here is going to be, again, this class. I'm going to try to give you as much depth as I can. There's a lot of chapters and there's a lot of breaths going on because it is is the intro class. thierry brusselle: So if you think about every chapter we cover each chapter is almost a tenant about the umbrella of Business Administration.
6:04
thierry brusselle: There's, you know, a little bit of everything. A little bit of management, a little bit of econ over here, you know, just think about all of the above. So thierry brusselle: I'll just leave you be with the learning outcomes. I don't want to take the time to read each and every single one of them and just get started with this. thierry brusselle: Charismatic entrepreneur right here. Gustavo frame for those of you who are familiar with, with his work.
6:28
thierry brusselle: So the question is how do businesses and nonprofit organizations help create our standard of living. And this is where the author thierry brusselle: You know, opens up the concept of standard of living quality of life in the role of business. And for those of you who have traveled outside the United States. You have seen what in different countries, what role entrepreneurship plays right if you have less
6:55
thierry brusselle: If you go to a country where there's perhaps not enough income generated by people working there or maybe the state doesn't provide as much. They're not collecting enough taxes and whatever.
7:10
thierry brusselle: You see a thriving booming in entrepreneurship, but it doesn't mean that it translates into a high standard of living. thierry brusselle: So we'll explore that as we go. So first, our very basic definition business is an organization that strives for profit by providing goods and services desired by the customers so
7:32
thierry brusselle: as we as we kind of follow this. I know you all know what a good in the service is, you know, you sometimes you'll focus on a business that just does either good or one does other service only thierry brusselle: And sub, of course, will provide both. So the goods versus the services, it's often a lot more straightforward to sell a good if I want to sell this pen.
7:58
thierry brusselle: You know, I can talk about all kinds of things about this pen. But you can also yourself, take the pen and try to see how you like it, you know. thierry brusselle: And so that would be a good a service can be a lot more difficult because it's not tangible, you know, you can't see it, touch it, feel it, it's intangible so intangible goods tend to be a little bit trickier.
8:25
thierry brusselle: Moving into the standard of living. Any country, the standard of living of any country is measured by the output of goods and services you can people can buy with the money they have. So this is where it's going to get really interesting
8:37
thierry brusselle: We're going to have a chapter here on international business in this class, which is one of my favorite chapters and here we'll talk about thierry brusselle: How to calculate that way how to look at standard of living from country to country and we look at several things right. We look at currency. thierry brusselle: And how even to compare one currency to another because they're not the same.
9:01
thierry brusselle: The cost of living, etc. But the standard of living is an important one. So I have these hyperlinks. It's hope that everything works out well here. And by the way, the slides are available to you on canvas right and so
9:17
thierry brusselle: Here we go. So this is from the United Nations and this is kind of how your, your to gauge the Human Development Index ranking in countries thierry brusselle: And the Nordic countries tend to be, you know, always Norway is is at the top Norway's fascinating. It has the largest sovereign wealth fund.
9:38
thierry brusselle: On the planet, which basically is the government with the money that it makes selling natural gas and oil instead of just spending it it invests it all over the world. thierry brusselle: It's called a sovereign wealth fund and so Norway is fascinating. In that sense, because there's a lot of money going around in that country to, you know, for free education and stuff like that.
10:00
thierry brusselle: Switzerland, Ireland, Germany. So anyway, I know, I know a lot of students. So are we, you know, kind of surprised when they see this because the they think what why we have the top right. thierry brusselle: And so we come up to number 15 right right behind the UK and just prior to to Belgium. So again, and you look, that's the human development index there. thierry brusselle: So that's that determined as a means of measuring your standard of living.
10:30
thierry brusselle: Then you look at the quality of life. Right. The general level of human happiness based on things like life expectancy educational standard health sanitation and leisure time. I'm sure you're seeing all kinds of data out there during this covert 19
10:48
thierry brusselle: Pandemic that we have about work and risk and unemployment and of course it's no surprise that there is a clear and direct correlation thierry brusselle: between education and unemployment, education and risk. Unfortunately, the people with a lower level of education are also the ones that are most exposed during this pandemic to the virus. thierry brusselle: So you know these things when you think about the quality of life, of course, the player role right
11:21
thierry brusselle: When you look at the different tenants of business risk revenue cost profit. I'm not going to spend a whole lot of time. Again, I'm following along with you. Your book here. thierry brusselle: When we especially look at entrepreneurship and you think about why would someone be, you know, an entrepreneur. thierry brusselle: Often freedom is the number one reason they want to be their own boss and they're willing to take the risk that comes with being their own boss.
11:47
thierry brusselle: Their revenue is what you collect the cost is how much things cost you and the split is the profit or whatever you have. Beyond that, I'm gonna keep it super simple to move on.
12:00
thierry brusselle: The factors of production. Notice I have a title for plus one factors of production. thierry brusselle: And, you know, whenever possible, I'll try to illustrate what I mean by that. So you have four factors of production, but the author, you know, adds a fifth one which is knowledge. So let's start with the just the basic four right so commodities natural resources mineral farmland, etc.
12:23
thierry brusselle: But the United States, of course, is packed with commodities ever since. Ever since we, we, the United States discovered how to get oil from, you know, shale thierry brusselle: We have been able to produce oil and so that that has actually for several years and for a few years, the US ranked number one on the planet for oil production, which
12:47
thierry brusselle: No one thought that would ever be a possibility. But that's because of shale and drilling, which by the way is controversial. There's all kinds of reports out there about, you know, the unintended consequences to people who leave who live in communities that have that
13:05
thierry brusselle: And so that's a natural resource if the country's abundant we there's you know again farmland minerals thierry brusselle: With natural resources. If you think about countries that have very little natural resources. Think about, for example, Japan, tiny little island. thierry brusselle: And a lot of what it needs has to be importing a country you know lumber. For example, it has to be all important.
13:27
thierry brusselle: And so, you know, Japan is how to develop other core competencies, by the way. Number five is one of the main core competencies of Japan knowledge. And so then for number two we're getting into labor. Human Resources economic contribution of people working with their minds and muscle.
13:46
thierry brusselle: California
13:48
thierry brusselle: California is the number one state in the US in terms of gross domestic product, it's the number one state in the US in terms of population. thierry brusselle: And so there's a lot of reasons why people would want to come here. But there's also reasons why people might want to go somewhere else. Example is cost. Right, so
14:06
thierry brusselle: We have highly educated workforce in state of California, but that comes with also the costs associated with living or operating in California. thierry brusselle: So what does that mean well as long as you can attract, you know, a strong knowledge workforce and I'm kind of mixing the two here with labor human resources.
14:27
thierry brusselle: Then you will attract investments you will interact, you know, domestic investment foreign investment in the form of factories businesses, etc. Right. thierry brusselle: You want your people educated, the more educated your people, the more you will attract that the less educated your people, the lower the type of jobs available in terms of skill. thierry brusselle: And the more replaceable. They are just remember this. There's about 330 million plus Americans so
15:01
thierry brusselle: 330 million Americans and there's about 7 billion plus people on this planet China's about 1.4 billion people India's about 1.3 billion people. So if you think about just India alone. thierry brusselle: The population of the United States is the point three of India's 1.3 billion. thierry brusselle: Why am I telling you this because labor matters in terms of cost and in terms of skill and if you have an unskilled low end
15:36
thierry brusselle: An educated workforce and we also have higher cost of living our currency may be stronger then of course those jobs are easily displeasing on replaceable elsewhere education people education is everything.
15:53
thierry brusselle: Capital. In this case, we're talking about the tools machinery equipment buildings used to produce the goods and services to get them to the consumers. So this is where later on we'll talk about what's available in terms of infrastructure.
16:07
thierry brusselle: You know, capital gets often linked with infrastructure. Does the country have a strong, solid, reliable infrastructure for me to distribute product and go from factory to customer, etc. Number four is entrepreneurship.
16:25
thierry brusselle: Entrepreneurship is a French word for undertaking literally is what it means an undertaking, someone who undertakes to Be their own boss and to undertake their own endeavor. So that's the etymology of that word. thierry brusselle: It's a broad word people who combine the inputs of natural resource, they were capital to produce good service with the intention of making a profit or accomplishing and not for profit goal.
16:51
thierry brusselle: I am I haven't gone into the nonprofit for not for profit yet. Think about Chafee college what you're attending right now you're attending a public institution. And so it's a nonprofit organization.
17:06
thierry brusselle: And so the goal of Chafee college is to add value and the product is really, you guys. You guys are the product of the education what what you are going to be able to do is show someone that your degree has value and eventually get the kind of career that you want to get
17:27
thierry brusselle: The knowledge. There we go. The knowledge. The combined talent and skills of the workforce, it has become a primary driver for growth right knowledge has doubled over the last 30 years with an estimated 2 million knowledge jobs opening annually. That's straight from your author
17:43
thierry brusselle: The question and that's what I have going, you know, circling back to the top of your slide brain versus brawn which which part of the economy. Do you want to be part of right
17:59
thierry brusselle: You know, right now, real estate is booming. Because the interest rates so low. There's just so much inventory that my understanding is even lenders are having a hard time just keeping up with demand. That's fantastic.
18:16
thierry brusselle: And so what, when you think about where we are right now in terms of different facets of the economy is just an interesting time for lots of different reasons. The reason I'm telling you this is because real estate is booming.
18:32
thierry brusselle: I know I have students who are thinking, I'm going to pause on my education and work in construction right now because I can get decent cash in construction.
18:45
thierry brusselle: And that's all great.
18:47
thierry brusselle: Until then, the economy, of course, is cyclical and things slow down and construction is down and then without the education. thierry brusselle: These students get hurt. First, so I use this because I've seen it. I've been teaching of Chafee for 20 years. I started teaching at Cal Poly in the
19:05
thierry brusselle: 96 and so I've seen it over the years and I always want to remind everyone that it is it's got to be your priority, no matter what you do to make sure you get your education out of the way. thierry brusselle: And I'll share with you throughout the duration of the class. The you know statistics that show what life is with a college degree and what level of college degree, on average,
19:32
thierry brusselle: All right, moving along. What are the sectors of the business environment and how do changes in them influence business decision so
19:41
thierry brusselle: I just, you know, The Economist magazine is a magazine, a source that I refer to for what's happening and
19:50
thierry brusselle: The, you know, the big, the big issues. There's goodbye globalization, you know, which has been kind of a theme. thierry brusselle: And what is globalization. Well, that's a whole topic we'll discuss when you get to the chapter, but you have an idea. And if you don't know what it means. thierry brusselle: You know, look in your backpack ladies look in your purse and just grab everything and look at the country of origin, right, probably most likely
20:14
thierry brusselle: The things that you like and you have a lot of it is made outside the US, you know your your your phone right my iPhone in the back there, that there's a little
20:25
thierry brusselle: Statement that remind everyone, it was designed in Cupertino, California, but made in China.
20:31
thierry brusselle: And so what, why am I saying this because we have. And again, I don't want to just dump everything on you right now, but I want to make sure you understand that when it comes to globalization.
20:44
thierry brusselle: We have decided to specialize in some things and we have decided to outsource in other things that we don't specialize in. Right. So, does it make sense for us to make a washing machine. thierry brusselle: Well, I mean, maybe you want us to make a washing machine. It'd be great people would have a job making a washing machine.
21:03
thierry brusselle: Remember this 7 billion people on this planet. How hard is it to find someone who can assemble a very simple thing like a washing machine. thierry brusselle: Cheaper than it would be if we assembled it here. So the question is what do we want to specialize in. How do we want to focus our energy and our resources. Right. And this is where in Econ you talk about that competitive advantage. Right.
21:27
thierry brusselle: And so having said all that, there's been a tendency right now with this whole thierry brusselle: Pandemic for countries to kind of be enclosed again and say, I'm going to try to do everything on my own. That's what this is all about. And so thierry brusselle: I'm giving you an update. That's not even in your textbook right now because one of the big things that's happening is, is
21:50
thierry brusselle: A risk that we're moving away from globalization, which means two things as you move away from globalization, two things happen. thierry brusselle: You have less choices because now you have less imports from overseas from, you know, over. There's about 200 countries on this planet. So you've just gotten rid of that. And the other thing that happens is quality.
22:13
thierry brusselle: So the quality is not the same, because you're trying to do something you didn't use to specialize in and you're not getting the thing that someone specialized in thierry brusselle: The third and last one is causing the cost, right, because I'm not specializing in number one, it affects my quality but number two.
22:29
thierry brusselle: I'm not able to make it as efficiently as this other country was doing, which means the cost is now higher so that's that's the three things right there. So what does that mean thierry brusselle: Imagine that dollar that you have that dollar shrunk used to be able to stretch that dollar and used to be able to buy that import whatever
22:48
thierry brusselle: Now you have to buy the thing that is made here, which means is going to cost more, which means you're gonna have less money to spend on other things like diapers, or whatever you well not you may be, but your children.
23:00
thierry brusselle: And then of course, you know, no need to really go into detail about the pandemic, but that's that's the, that's the big one.
23:08
thierry brusselle: All right, the dynamic business environment. Again, please follow along with your book. And so you'll see that straight from your book. thierry brusselle: This is a, this is an important one right here. What we have here is these external forces that affect the internal environment. I want you to look around your room right now at home, wherever you are. I want you to look around the room and I imagine there's four walls. Right.
23:33
thierry brusselle: And I want you to think about those four walls as being the business right and I want you to think about everything inside those four walls and we're going to call those things. thierry brusselle: The controllable environment, right, what is it that you control. Well, you have your business plan, hopefully you have your budget that you control. thierry brusselle: Now of course this external factors are going to determine how much of it, you're gonna have
23:57
thierry brusselle: You're going to control how many employees you want, you're going to control the decision making on marketing on finance decision making a hiring separating thierry brusselle: All of these things are internal factors. Right. But of course, outside the four walls. There's these things that you cannot control. thierry brusselle: And here we have them here, the economic environment, the political, legal demographic social competitive global technological you know economic
24:25
thierry brusselle: All of those. We're going to call the uncontrollable external environment and of course they put pressure on everything you're doing so it's like an ongoing tug of war between what you're trying to accomplish as a business and what's happening outside
24:41
thierry brusselle: When you look at that, that, that pie chart right there. Of course, the one right now that's getting just crushing everything is economic right the global economic condition is in dire straits because of the pandemic, so you can put global and economic together.
25:00
thierry brusselle: So several things are going on.
25:03
thierry brusselle: Let's see, in terms of economic. Well, let's see. I have another hyperlink here for you from let's bring this here. There we go. So this is from MIT. Their, their web page on economic complexity and I wanted to show you this because I want to make sure that you know as you take this class.
25:28
thierry brusselle: I mean, you know, there's going to be a couple students out there who are going to just tell you what I want to hear. Tell me what I want to know. thierry brusselle: Is this going to be on the exam. I want to be done right and i i'm assuming those students are not going to be watching this video here.
25:41
thierry brusselle: If you're watching this video, I want to first congratulate you for sticking it out because I want to make sure that you learn more than just a bunch of terms that you're going to memorize for an exam. thierry brusselle: I want to make sure that you walk away from this class with a really good grasp about business and the environment that affects it my personal
26:05
thierry brusselle: Passion, if you want to call it that is international business and that so I created the class and the program at cioffi I'm passionate about it. And so of course I have a little bit of a bias when it comes to what I like to focus on thierry brusselle: So before I show you everything here. I want you to think about imagine when you look back at those four walls that you are the business.
26:29
thierry brusselle: And imagine that you're selling some product, it does you know whatever it is that you're selling something that you're making assembling could be a service could be whatever you want. thierry brusselle: And I want you to imagine your best customer right you have someone who's a good repeat customer, you have a good relationship with them, they like you to extremely loyal to you.
26:52
thierry brusselle: And you do more business with them than anybody else. And I want you to imagine and think who that is for the United States, right, who's our best friend. thierry brusselle: 200 countries on planet Earth. Well, depending on who's measuring and of the 200 countries who buys most from us, the US who spends their money on us. What, what are the top two countries that you're thinking about
27:23
thierry brusselle: So now that we've gone through this little exercise and you have some ideas. Let's see. Right. And so what we have here, by the way. thierry brusselle: You know, this is a really cool way. It's the OTC dot world if you're interested. And if you want to Google it. It's MIT economic complexity. thierry brusselle: This gives you some quick facts at the top right, if you know you our GDP is about $20 trillion right here which number one in the world, our growth rate from
27:53
thierry brusselle: Was 39% anyway, there's some, you know, basic information over here.
28:00
thierry brusselle: But as we scroll down we get some really cool little more more interesting little charts. Right. Some are really sobering such as right here. Sorry, my thierry brusselle: Computer slowing down. There we go. Comparison in time in terms of exports. Right. Holy smokes. Look it up.
28:19
thierry brusselle: So, and, and then product and trade. So, who is our best friend, right, who is our best friend. Our best friend in the whole world is Mexico. Mexico is your best customer. This is your number one repeat customer, and I want you to think about that.
28:39
thierry brusselle: And you know this is business. But what we'll find out as of course politics affects business and I want you to think about politics and I want you to think about policy, and I want you to ask yourself.
28:51
thierry brusselle: If you can predict that trade with Mexico will go up or down in the future is Mexico going to be more or less inclined to invest in spend money in the US, you know, with considering policy.
29:05
thierry brusselle: Canada is number two.
29:08
thierry brusselle: So yes, Mexico, number one, and then in Canada and of course number three is China. Maybe so. Several of you guess China. Sometimes I've students guessing Germany. thierry brusselle: But what does that mean, it means that we do our business in North America is what that means right
29:23
thierry brusselle: And, you know, in terms of imports to the United States. Then of course we buy 20% of our stuff from China, but again there's bilateral trade significant bilateral trade going with Mexico and Canada. There you go. Our best friend.
29:40
thierry brusselle: We import cars. That's our number one import and our number one export to piggyback to where we were circled back to what we talked about earlier. thierry brusselle: Is oral it's still oil because of demand in the world for oil. I wanted to share that with you. thierry brusselle: In terms of social, you know, of course, the entire movement, the Black Lives Matter movement has transformed things it's shaking up things
30:09
thierry brusselle: It's great to see what companies have gotten the message. It's great to see who is doing something about it. thierry brusselle: In terms of equity. And what I have here is from Business Insider the six brands that reveal plus to change their names. It's about time.
30:30
thierry brusselle: There are some things that came out of this movement that I've really been positive, right. And so just to kind of show you some of sorry about the ads, but these are the brands that you know are you know their parent companies are doing something about it.
30:49
thierry brusselle: So again, this you know these this wheels showing you what environment is affecting what
30:55
thierry brusselle: I have on the left here, when you talk about the different changes that are happening. thierry brusselle: I have in terms of technology. I know everybody hears about the electric cars and you know some people think Greg, who cares and not for me. I don't care. Whatever, whatever. thierry brusselle: But here are things that you need to know. I have bottom left a resource here from the Economist sourcing Bloomberg
31:20
thierry brusselle: That is a forecasts of electric vehicle sales. It's a forecast by Bloomberg by old packet by Exxon thierry brusselle: And what you can see here in terms of millions of cars you can see from 2020 which is now you can see what's going to happen in the future. Nobody knows exactly what's going to happen. thierry brusselle: Top left of the screen. What you're seeing here is from 2008 up until the future moving to the very end of 2022
31:51
thierry brusselle: What's happening to these two variables we one of the variables is the cost of the battery. And you can see that cost going down. That's the one going thierry brusselle: Top left bottom right. And of course, bottom left, top right is the energy density for those of you who are familiar with the computer industry. thierry brusselle: This is something that more came up with called Moore's Law, which showed that every year the speed of CPUs and computers.
32:20
thierry brusselle: Was going up, but at the same time, the cost was going down. Right. So the computers were getting faster and cheaper, year to year after year after year, seek of that Moore's Law applying to electric cars. They're getting cheaper and they're going to go farther
32:37
thierry brusselle: And so the question is, eventually, there is a displacement with the combustion engine where it doesn't make financial sense for someone to buy a car that maybe has a lifespan of 150,000 miles. thierry brusselle: And will cost a lot where you have to change the oil in the transmission and all these things to worry about the belts and the oil change. thierry brusselle: Where you have a car, you just plug in, with very little maintenance and on top of that.
33:03
thierry brusselle: On one charge you know 345 hundred miles is what we were talking about. And now there's talk of a new battery coming out with a lifetime of a million miles. So there is a displacement that is currently taking place and will continue to take place with the
33:26
thierry brusselle: Slow death of the combustion engine. And I know some people are freaking out. It doesn't mean they're all going to be gone. But it just means that people will choose a cheaper alternative and that will be it.
33:40
thierry brusselle: Anyway, you can piggy you again, you can you can add technology to that you can add global to that. There's lots going on in terms of foreign companies of China, as you know, several car companies that they're there, you know,
33:55
thierry brusselle: Working on a selling, etc. This is the wheel people competitive. Let's talk about competitive a little bit the exercise that I usually have here is for you to think about just what competition means we talked about tangible versus intangible. There's also needs and what
34:14
thierry brusselle: I need to hydrate, we need water to hydrate. Don't wait. So the hydration is a need
34:24
thierry brusselle: I have hydrated. However, I could also hydrate with a one, I could decide to buy a Coca Cola and hydrate that way. Right. So just remember that when you think about competition. thierry brusselle: There's direct competition. There's indirect competition. There's substitute product is new entrance. There's all kinds of cool stuff will be talking about right.
34:44
thierry brusselle: So I know, spend a lot of time on that. Moving along, now we're getting into the ECON stuff. I'm not going to just go nuts. So with the ECON it's a requirement for business. Anyway, all of you have to take macro micro you're going to get all of your
35:01
thierry brusselle: Your, your fair share their of comparative advantage absolute advantage, all that good stuff. So I'll just just kind of keep it light.
35:10
thierry brusselle: You know, I have a picture here of the book. thierry brusselle: I like this particular version of it because you get the full title Adam Smith's original title was not called the wealth of mission. It was called an inquiry into the nature and causes of thierry brusselle: The wealth of nation and you know it's the Bible of econ right he is the father of econ. In fact, a lot of people will say he's the father of capitalism, because you can't have one without the other.
35:39
thierry brusselle: So an economic systems, a combination of the policies and laws of choices made by government to establish a system that determines what good services are produced or how they're allocated. thierry brusselle: And so, you know, because we have a more you know capitalistic system mixed economy really, we, we, the government doesn't tell us what to do in terms of production. Right.
36:02
thierry brusselle: Of course it has some involvement farming is a great example. We have government subsidies. So in this case, government does really kind of get involved, doesn't it. thierry brusselle: Where it tells farmers don't plant this don't produce that or plant this instead. Or I'm going to subsidize this for you with, you know, lower costs so we we have kind of an interesting thing going on there. That's why really, we do have a mixed economy.
36:28
thierry brusselle: Economics is a study of how the society uses scarce resource to produce and distribute goods and services. And this is where you have varying degrees of that right
36:38
thierry brusselle: Let's see the basic systems. Again, these are some of the topics from the Economist magazine.
36:46
thierry brusselle: Rising millennial socialism and the next capital is revolution is all these talks going on. thierry brusselle: Not going to go through the whole table with you, but you will need to know the differences. Hint, hint. And so when you compare the four here capitalism Communism, socialism mixed economy.
37:05
thierry brusselle: The book will list the United States as capitalist. I know that other books will tell you that it's more of a mixed economy, you know, just kind of know that, you know, it depends who what the source is
37:21
thierry brusselle: And again, capitalism usually is business or privately owned with minimal government ownership or interference and that's the thing, right, at least the government thing where, where are we really with that.
37:35
thierry brusselle: Communism government owns all or most enterprises, you know, you look at Cuba, you, you look at you know any way, by the way, let me just talk about that real quick communism. thierry brusselle: If you think about the usual suspects. When we think about communism, right. So, you know, China, Cuba, you know, North Korea. But, you know, Vietnam. Yeah, right.
38:02
thierry brusselle: You know, when Karl Marx wrote, you know, the Communist Manifesto and Das Kapital. When you, when you look at it and study his writings and nowhere in there, there's a talk about
38:16
thierry brusselle: You know how to create a stock market or commodities market or futures market in in those countries. Right. And yet, thierry brusselle: Vietnam has a pretty robust and healthy stock market and of course, China has a very robust and healthy stock market, you know, Vietnam, as you know, McDonald's, the Hilton Hotel.
38:38
thierry brusselle: However, North Korea does not right. None of the above. So if we were to have like a spectrum of communism, the one that's like real hardcore like diehard
38:51
thierry brusselle: Communism. It's going to be North Korea is the crown jewel there, you know, talk like a duck walk like a duck quacks like a duck walk like a duck looks like a duck, it's a duck North Korea is hardcore, the real deal communist
39:09
thierry brusselle: China is interesting, right, because it's you know it's communist with capitalist characteristics. Right. And so it's a long time ago. It was a
39:25
thierry brusselle: Chelsea meeting, I believe, who said
39:29
thierry brusselle: If it doesn't matter if the cat is black, or the cat is white. As long as the cat can catch mouse right and it was his way of saying thierry brusselle: You want to call this communist call this communist, it doesn't matter as long as we make the system work right. But anyway, I thierry brusselle: am getting a little bit more than what's in the book because I don't want to over simplify some of the aspects that are way more nuanced and interesting so
39:57
thierry brusselle: Just remember when you see these words, their way, all these words socialism. What exactly is. There's the different levels of socialism, etc. Capitalism. The most capitalists place in the world. Think about that for a second. What country.
40:13
thierry brusselle: Or place is the most capitalists place in the world. So as you think about that. There's different ways of measuring this right but traditionally when we talk about ease of doing business openness to trade openness to some other country coming in.
40:33
thierry brusselle: Hong Kong.
40:35
thierry brusselle: Hong Kong is number one in the world you want to go to Hong Kong right now, today, you want to fly there. Well, pretending that there's no comin thierry brusselle: And you want to start your business as a foreigner one form one piece of paper and things haven't changed is the other place in the world, Hong Kong.
40:52
thierry brusselle: New Zealand is always up there and Singapore. Those are usually the top three countries in the world. Most capitalist, which is ironic considering that Hong Kong is technically a province of China.
41:06
thierry brusselle: Alright, so again I know I spent a little bit more time that I wanted to spend there again your author is going to tell us that the United States is capitalist that's fine in for the sake of this. I don't want to confuse you, and stick to the author
41:21
thierry brusselle: You know, Cuba, North Korea is communist Vietnam and technically, of course, is Communist China on paper is communist thierry brusselle: And then socialism. This is where it gets really interesting Finland, India, Israel, you know, India in okay it's socialists on paper. Yes, yes. It's also the biggest democracy on the planet.
41:45
thierry brusselle: And so it's a again. Things are really nuanced. I hope you're not just putting a hardcore lever like this is what socialism is and this works because there's all kinds of varying degrees. thierry brusselle: And of course makes a degree a Great Britain, France mixed economy. Sorry, Great Britain, France, Sweden, Canada, I tend to push the US in there. But, you know, again, it depends.
42:10
thierry brusselle: All right. How do we economic growth for the full employment, price stability and inflation indicated nation's health thierry brusselle: Well, lucky you, there's a lot of stuff going on the news right now. So first the GDP. You've heard that you know what it is. It's a total market value of all final goods and services produced within the borders of initial each year.
42:31
thierry brusselle: And the GDP. A lot of people are going to tell you that it's it's good, but it's not great, because it's flawed. Right. thierry brusselle: When you're talking about Google and other American IT companies having between all of them over a trillion dollars worth of capital sitting in Ireland just Ireland alone. Well, that doesn't get counted as the GDP.
42:54
thierry brusselle: And so because we're so global things get kind of weird when you start to measure things by looking just at that. And so what I'm going to show you here is thierry brusselle: Through, by the way, yes. I use Wikipedia, shame on me and I use Wikipedia. In this case, because what what i have really is the IMF right so what we're looking at here is a ranking of
43:19
thierry brusselle: Countries by nominal GDP and as of 2019 the US is still number 120 $1 trillion, the economic Observatory earlier was showing about 20 so depends on the source.
43:34
thierry brusselle: And the European Union is number two, except it doesn't say number two, why anybody know why do we have the US is number one in China's number two. Well, because the European Union is not a country right thierry brusselle: Again, we'll talk more about how to set up when we covered the chapter on global China's number two at $14 trillion. As you can see, Indonesia is the last country to be part of what we call the Trillion Dollar Club out of 200 countries on the planet.
44:05
thierry brusselle: Are trillion dollar economies, you know, missed it by that much Netherlands.
44:11
thierry brusselle: And and tiny little Switzerland, look at you know 715 billion. So anyway, these just to kind of give you an idea that's that's how that works right there. You know, I talked about Taiwan and Hong Kong early look at Taiwan right there, half a trillion
44:28
thierry brusselle: So that's it for that, um, thierry brusselle: Let's see, the rate of growth. So there's two ways of looking, you want to look at the economy, looking at the GDP, but also of course what's important is how fast the economy is growing right year to year. So the growth in real GDP is going to really be an important part of the picture.
44:49
thierry brusselle: In the past five years, even though the US GDP is the biggest one on the planet, what's been interesting to see. thierry brusselle: Is that, of course, China in India, not only have ginormous GDP, but their GDP are going
45:04
thierry brusselle: For way faster than, you know, our GDP. So this is from the International Monetary Fund, the IMF and it's showing you over here growth by color so green, of course 6% more and read less than negative three. So most countries most places are showing that
45:24
thierry brusselle: And then over here, you know, you can kind of see what's going on. I hope you could consider what what I'm seeing. But of course, everybody. The whole world kind of drops to negative three, negative six, in terms of GDP growth. We're all in trouble.
45:40
thierry brusselle: Alright so unemployment rate is important, but it's complicated, a little bit because people think unemployment tells you how many people are unemployed wealth and partly true. thierry brusselle: What does that mean, well, the percentage of the total labor force that is not working, but
45:56
thierry brusselle: actively looking for work so discouraged workers are people not looking for work, because I think nobody will hire them. People who have maybe just stop trying for a while. They're not counted as unemployed. thierry brusselle: And so if you think about, you know, and by the way, we're not even talking about under employment, which is a whole other thing. We'll talk about that more when I do the chapter on global
46:20
thierry brusselle: You have the friction of unemployment short term unemployment not related to business. So people were unemployed while waiting. Waiting for a new job. So that's called free friction all the structural thierry brusselle: You know it's involuntary so birth rate declines fewer teachers will be needed etc cyclical unemployment, well we're doing that right now. Right. We have a pandemic. We're in a massive, massive recession. So that's where we are.
46:46
thierry brusselle: I'm going to go lightweight on this one here with a monetary policy, because I know I'm already spending so much time on this. thierry brusselle: Government's program for controlling the amount of money circulating in the economy in global I'll do more on that, but I'll do it more in a international level.
47:02
thierry brusselle: With a focus on other countries and how the role monetary policy can really have a horrible unintended consequences. So the fed the Federal Reserve central banking system with the US prints money controls how much of it will be there.
47:21
thierry brusselle: Let's, let's leave it at that for now. I have some hyperlinks. You can, you know, look at them later on. thierry brusselle: When I'm looking at the time. I want to make sure that I don't spend a whole day on this lecture. Feel free to pause finished whatever you want. If you feel it's a little overwhelming.
47:37
thierry brusselle: The federal budget. Again, this is from the book. I'm not going to bug you. With that, don't worry too much. All right, supply and demand. We're still doing econ
47:45
thierry brusselle: And we're going to just first look at the demand curve using an example which is jackets for snowboarders alright so if we, if we look at this demand curve. The idea here is that thierry brusselle: When the price is high about over $150 for a snowboard jacket, then you'll have about 200 people who will buy it as the price drops thierry brusselle: $200 midway, you'll have 600 right so already, three times more than when you had 100 and something
48:20
thierry brusselle: But then as you keep dropping you look at that and when we're about 50 bucks. Now we're doubling the quantity right so thierry brusselle: You know you you cut the price by half from 102 50 and what you've done. You've also doubled. thierry brusselle: The quantity. Right, so two to 1200 so if you have what we call economies of scale or skill abilities than your per unit cost maybe of the jackets cheaper with the 1200 than it was with a 600
48:50
thierry brusselle: Which means your profit might be greater. But right now, just keeping it kind of simple that's, that's where we are.
48:58
thierry brusselle: Let's look now the supply curve right the supply curve is interesting because thierry brusselle: What what you're seeing is that well obviously businesses are not going to be very interested in making a very cheap jacket. Right. thierry brusselle: Why, why do I want to bother with making a jackets for like 30 bucks. But maybe if people are going to spend over 150 bucks. I will make as many as you want me to are as many as I can.
49:22
thierry brusselle: But you could see between the two. There's, you know, you know, contention between the supply and demand curve. And that's when we have to look at where they agreed, where they meet thierry brusselle: And that's where you look at the quantity demanded your quantity supplied and equilibrium is where the two shall meet not going to bug you with too much of the other stuff the surplus a shortage. Don't worry about that you'll get all that stuff in Econ
49:49
thierry brusselle: The shifts in demand for jackets for snowboarders so there could be different things that you know make things change. So maybe snowboarders thierry brusselle: Got more money. You know, there's, you know, there's been an increase in minimum wage or whatever, boom, increase in demand or they lose their job.
50:05
thierry brusselle: Decrease. And, you know, so that's what the 1D to would imply in terms of the shift in demand and how that shift in demand would affect the supply and demand curve. thierry brusselle: Keep it simple for now the numbers of suppliers in the market defines the market structure. So now what we're looking at is we're done with the whole supply and demand thing.
50:24
thierry brusselle: And we're looking at markets as a structure. So we have, we know what competition is and we're going to look at the two different levels of competition to perfect competition. thierry brusselle: And monopolistic competition and then we're looking at a pure monopoly in a you know oligopoly. So in both the perfect competition you and the monopolistic competition. You have many
50:49
thierry brusselle: firms in the market.
50:52
thierry brusselle: For monopoly, obviously you have one
50:55
thierry brusselle: In high school, I'm sure you all study the whole thing on monopoly you play the game Monopoly. You know that bald guy with the mustache, of course. thierry brusselle: You maybe don't know who that is. But for those of you who are familiar with him. He was Rockefeller. He's the guy who had Standard Oil right he was a reviled a human being.
51:17
thierry brusselle: You know the story of Standard Oil was was horrific you know the the American dream of, you know, striking, you know, gold by drilling a hole in the ground and having oil come out, boom, I can sell my own oil. He just crushed that by having standard oral just just, you know,
51:38
thierry brusselle: force people to sell to him by buying the intermediaries right you you couldn't ship your oil because he owned every aspect of the distribution of oil.
51:51
thierry brusselle: So because of him. We have antitrust laws, right, the Sherman doc the Clayton Act. Those are laws that were created. thierry brusselle: There people refer to them as anti monopoly laws, but that's not really true whether or not they're, they're not designed to prevent monopolies. thierry brusselle: That's more of a cause and effect. They're designed to protect competition and the way you protect competition is when you have to, to put a stop to
52:25
thierry brusselle: Anti competitive behavior. And in this case, a monopoly is anti competitive behavior. Let's go with oligopoly is also an anti competitive behavior. thierry brusselle: If you want to do a fun search, you can click you can do a Google search on thierry brusselle: US airline industry oligopoly, and you're going to find out that about if I remember well about six airlines in, you know, in the US, six airlines account for
52:55
thierry brusselle: 80% of the entire market that's an oligopoly. And this is when things come into like they're, you know, they're not allowed to talk to each other. This is, you know, price fixing, or collusion, all of that anti competitive behavior.
53:13
thierry brusselle: So monopolistic competition is you have many in terms of the firm's but fewer than perfect competition, think about in this case.
53:23
thierry brusselle: You know, agricultural area will talk more about just in second firms ability to control price with perfect competition non pure monopolies, very, very high song with monopolistic and with oligopolies some as well.
53:37
thierry brusselle: Let's just go straight to let's look at product differentiation. Why aren't monopolies horrible well because if nobody's buying for me. I'm sorry if I have no competition or any worry about anything. You're just going to buy what I gave you tough. If you don't like it.
53:53
thierry brusselle: When the Soviet Union collapsed. There was a book that was written called
53:59
thierry brusselle: The the
54:02
thierry brusselle: Decline and Fall of the Soviet empire, and it was written by a journalist who resided in Moscow is fascinating.
54:10
thierry brusselle: But one of the things that he talked about was during the Soviet era quality of goods was so horrible because there was zero competition. thierry brusselle: And the Russians were quite upset the Soviets were quite upset because they knew that the, you know, whatever little money, they had thierry brusselle: The product that they spent it on were just horrible that we're not allowed to import anything
54:32
thierry brusselle: So they had to buy shoddy products from one factory somewhere made by a bunch of people who didn't really have any incentive to work any faster harder because there's what are you going to do not buy my product. Go for it. It's that or nothing.
54:48
thierry brusselle: So in terms of perfect competition. There we go, farm products such as wheat, corn pure monopoly, you know, water cable TV etc monopolistic competition. This is where they talk about clothing store and of course oligopoly. There's your airline aircrafts.
55:07
thierry brusselle: Automobiles, although I don't know how that works. There's enough choice there but
55:11
thierry brusselle: You know, this is why they refer to Elon Musk of Tesla fame as a disrupter right
55:19
thierry brusselle: Alright, so as we kind of come toward the end of the chapter here the trends that are reshaping the business, the micro economic and macro economic environment. thierry brusselle: There's several but I wanted to highlight this one. There's some. There's a lot of stuff going on when you look at the external environment. And of course there's updates since the book was published, because of the whole globalization covert thing.
55:43
thierry brusselle: But this one here is one of the big ones, the demographic change. So what I did is I just, this is a, you know, I have the source there. So this is from the census via Geneva showing you the total
56:02
thierry brusselle: American population 330 plus million people and by what we call age cohort. Right. So when you hear of Gen Z Gen X baby boomers. Those are what we call age cohort classification
56:19
thierry brusselle: And so you can see what's happening to BABY BOOMERS. RIGHT. THE RED
56:24
thierry brusselle: There's actually kind of like a one two punch going on with the baby boomers, which is that already that age core is showing you that, you know, people are retiring and you know that segment is decreasing. thierry brusselle: Because of age and so you're talking about baby boomers between the age of 55 to 74
56:46
thierry brusselle: And in that segment is obviously decreasing
56:51
thierry brusselle: And what you know there's an article here. I mean, I don't have to click on it, you can actually see it, but you could look at it later. It's from a RP showing you that
57:01
thierry brusselle: There is now a huge group of people age 50 and over who are retiring early because of this whole thing. So not only were we seeing that the changing demographic was showing thierry brusselle: That a big chunk of the population is going to retire. But now, because of code 19 you have an update on that which is that people are even retiring at a faster rate than they work.
57:32
thierry brusselle: So what does that mean I'm going to circle back to the beginning of this entire presentation, which is what does that mean to you.
57:39
thierry brusselle: You know, this is where again you want to make sure that you see changes opportunity see changes, an opportunity thierry brusselle: I want to congratulate you on your decision of choosing business as a major. I don't get paid extra whether you choose business or not. I don't, there's no incentive for me to tell you that other than
58:00
thierry brusselle: The good news for you is, it's a degree that has value and the way you can calculate that value is by demand. thierry brusselle: Students who graduate with a bachelor's in business are going to have a way easier time than many students who don't have that degree. There's few other areas than business where there's a demand for that degree.
58:26
thierry brusselle: And so that's good news for you guys.
58:32
thierry brusselle: Having said that add to that, what you just found out right now. So the question that I have for you is, what are you doing about it. What are you doing are you staying at home playing on your PS4 all day long.
58:48
thierry brusselle: Are you just just hang in Beijing, what are you doing well, obviously you're taking this class, right, so that's good. I want you to take advantage of this time.
59:01
thierry brusselle: You know, people always complain, they don't have enough time. Well, congratulations. You can officially be in one, two or three places at the same time. Now you don't have to worry about a 50 mile 30 mile commute to somewhere you have time. What are you doing with it.
59:18
thierry brusselle: So start thinking that way, ask yourself, Am I differentiating myself. You see there are going to be opportunities. They're coming your way.
59:29
thierry brusselle: It is a crime for you to be like everybody else. It is criminal. When your employer potential employer asks you point blank. thierry brusselle: Why should I hire you out of the hundred people who came here with the same degree you better have something to answer. thierry brusselle: And it's not going to be your charisma and charm. I'm sure it's great, but it's not. It might not just be enough.
59:54
thierry brusselle: And so ask yourself, what am I doing to differentiate myself, How can I add value. Do you have a LinkedIn account created. Have you reached out to former employers and ask for recommendations reach out
1:00:10
thierry brusselle: Are you using the extra time to learn a new skill. Are you getting certified in the new skill.
1:00:19
thierry brusselle: Now's the time. So again, I want to, I hope that this advice is not something that is I'm just lecturing you here. thierry brusselle: As to what to do with your life, but just reminding, those of you who already know it and maybe informing, those of you haven't thought about it that it's now. You guys know your window of opportunity is open.
1:00:38
thierry brusselle: And it's getting wide so now's the time take advantage of it. And the best way you can do that is, ask yourself how to differentiate yourself. thierry brusselle: And what can I do as I further my education to make sure that continue to do them. That's it. That's the end of that. And so I will please email me post to the forum on canvas. If you have any questions, and I shall see you guys in chapter two.
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